"Utility CEO on Solar: In “3 to 5 Years You’ll Be Able to Get Power Cheaper from the Roof of Your House Than From the Grid”"

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CEO of NRG Energy: The fundamental issue of our day [is] climate change…. The people who were opposed to climate change legislation used one of two tactics. They either said, “Well, we don’t believe it’s happening.” Which, of course, is just a bald-faced lie.

Or the second part of the one/two punch is, “We can’t afford to do anything about it because a synonym for the word “green” is “expensive.” But looking forward, electric vehicles will be far cheaper to operate than internal combustion engine vehicles. And solar panels on the roof will provide power more cheaply than taking power from the grid.

That’s from a Yale Environment 360 Interview of David Crane, the CEO of one of America’s’s largest electric utilities. It produces power for some 20 million U.S. households, and over 90% of NRG’s power comes from natural gas and coal. But Crane says the future — the near future — will be different.

e360: What can you do as a major power generator to nudge the country toward a renewable energy future?

Crane:I think the most important thing is to make the American public aware that now they have energy choices in a way that they never really did. You don’t just have to settle for using electricity in your house that is supplied by coal-fired power plants on the grid. And you don’t just have to put oil that comes from the Middle East in your gas tank. You can buy an electric car. You can put solar panels on your roof. You have choices now…..

e360: Could you talk about NRG’s move into utility-scale solar, and also your vision long-term of large-scale solar, versus distributed [smaller-scale] solar power?

Crane: So far most of our business has been utility-scale solar — gigantic plants in the desert. The biggest solar [project] we have is 295 megawatts. That’s something like 6 million solar panels. Those projects are really dependent on two things, because they cost over a billion dollars: the Department of Energy (DOE) Loan Guarantee Program and California’s 33 percent Renewable Portfolio Standard, and the fact that the two largest California utilities have been willing to sign long-term agreements in order to meet their requirements [to obtain 33 percent of their electricity from renewables by 2020] under the Renewable Portfolio Standards. We have over 800 megawatts of projects out there, which is a huge number for solar. But our view is that because the DOE Loan Guarantee Program is going away and the California utilities are coming close to putting themselves in a position to satisfy the requirement, there will be fewer of those projects in the future.

We expect to continue to pursue that business and to do well, but that’s not going to be the explosive-growth part of the industry. The explosive-growth part will be between distributed solar power, which is like 1 to 10 megawatt size, and then residential, which is measured in kilowatts. We have so many parking lots and warehouse rooftops and residential locations where people want to reduce their monthly electric bills and that is just an enormous area of growth….

e360: Can you explain your three-pronged approach to transforming the country’s electricity system.

Crane: Democratization of customer choice in our sector begins with two things. One is the electric car and the other is the solar panel on the roof. I think it actually starts with the electric car. You put the electric car in your garage and you really have a mini power plant because these batteries that drive electric cars are quite substantial pieces of equipment. The average car in the United States is sitting still about 22 hours a day. Those are hours where the car can either be accepting power from the grid or selling power through the grid in a phenomenon we refer to as V2G, vehicle-to-grid. That leads to the third leg of the trilogy, which is the smart meter, because between a smart meter in your house, combined with time and use pricing, you essentially want that electric car to be charging between midnight and four in the morning. And you want to have it available to basically drain itself a little between 2 and 6 o’clock in the afternoon. But someone has to tell it what’s going on with the grid at that point. And that’s what the smart meter does.

Right now around the country people are trying to introduce smart meters as just another information device. In our view, no one wants to pay for another information device, particularly when the information being given is about something that people don’t care about, which is their electricity use. So smart meters will only be accepted by the American public when they do something of value. And the first thing that they’ll do of value is they will sense when it’s expensive to run electricity and they’ll turn appliances off around the house. But the next thing they’ll do, which is the most valuable thing that will actually put dollars in your pocketbook, is that when the smart meter recognizes that the wholesale system is getting tight and there is good pricing, it will actually sell into the grid from the car battery. Or if power from the grid is getting really expensive, the smart meter might just turn the house off from the grid and then run the key appliances in the house off the electric car in the garage.

Then you have the solar panels on the roof. If you tie in a rooftop solar panel with a smart meter, then it’s exactly analogous to the electric car battery. The smart meter could turn off the house from the grid at 3 in the afternoon and rely exclusively on the power that’s coming from the solar panels on the roof, saving the customer a lot of money on their bill from the grid. And if the person puts a big solar panel on their roof, they could sell power from that.

e360: Given the current cost of solar, how do middle-class families afford solar panels on their roofs?

Crane: This is something that most people don’t like to really talk about. But it’s just a fact of life that when you start talking about electric vehicles and solar on your roof, you’re talking about something that’s going to penetrate into the population top-down through the socio-economic strata. That’s just a fact of life. We’re very bullish on the electric car, but we don’t expect for another 20 years that a person who can only afford to have one car will have an electric car. But in America there are 60 million families that own more than one car, and that’s a big market. Ultimately, the answer to your question is this: If you assume that the average solar installation on the roof of a house is going to cost somewhere between $20,000 and $50,000, we think about one percent of the population is willing to write that check. So what the industry is already fast creating is lease arrangements, and power purchase arrangements if you’re a small business. Basically, a lease arrangement where someone like us actually owns the solar on your roof, and all the customer sees is an electric bill that’s no bigger than the electric bill they were seeing before.

We believe that in the next 3 to 5 years you’ll be able to get power cheaper from the roof of your house than from the grid. Solar is going to go from this thing that right now is like .1 percent of the market to 20 to 30 percent of the overall electricity mix. That’s huge…. If you go back about four years to where the price of solar modulars were, the prices have been cut in half in the last four years. I predict that the price of solar modules will be cut in half again in the next two years….

e360: To an average American who hears about Solyndra and thinks the solar business is in the tank, how do you explain that dichotomy of what you see as the promise of solar and yet this news about how solar manufacturing in the U.S. is doing so poorly?

Crane: I would say look back at the early history of the high tech-industry. Companies and chip makers failed all the time. The manufacturing business in any new area is a brutally Darwinistic place. One thing Solyndra was impacted by is that the cost of their product dropped like a stone, which is our basic point. When the Chinese government gives the Chinese manufacturers basically free money, and then says dominate the world’s solar modular manufacturing business, it’s going to be tough for manufacturers in other countries to compete with that. So what’s bad for Solyndra is good for the American consumer.

I applaud Crane’s vision and optimism, but am puzzled by some of his statements.

If only 1% of American families are willing to put panels on the roof at today’s installed cost of $20-50,000, that won’t change much if panel costs plunge further. Most of the cost of rooftop solar is for the wiring, roof hardware, and labor to install. The long term financing packages he describes have been in California for a few years, where it’s sunny and grid power is costly, but market penetration still lags.

I would love to see rooftops cheaper than the grid in 3-5 years, especially since feed in tariffs, cheap fuel for the family car, and income from the grid become feasible. But Drake goes on to say that electric cars will be a second car vanity item for a long time. We must assume that rooftop distributed power for homes and small businesses has several limits to its growth.

I hope that affection for rooftops is not a way to justify the statement that NRG is reducing its commitment to utility scale clean power. Rootop solar is limited at the national level, for many reasons: local climate and insolation, adequate rooftop space, local power costs, etc.

We really need a renewed commitment to a better grid and major utility scale clean power, especially solar and wind. Thank you, Mr. Drake, for your firm’s commitment to 800 mgw, which indeed places you among the industry leaders. As someone who is aware of climate change, however, you must realize that we will soon need dozens of plants that size if we are going to make any real headway. This means that now is the time to begin to plan the retirement of your firm’s 29 fossil fuel power plants. And “soon” does not mean by, say, 2035.

Please drop by here again. We badly need your knowledge and influence here and across the country.

Mike,
I am a solar designer/installer. Today, hands down, the largest component of residential scale solar is the cost of the panels. The reduction in pricing over the last few years has made a significant difference in our business.

‘The greenest ever UK Government’ Cameron declared, as he conned the suckers before the last UK election. In Australia, where political lying has become ubiquitous, that is what is known as a ‘non-core promise’.

It will be great when significang parts of the population have electric cars that they power from their roof-top solar. I have an A-frame with big windows facing south. I am afraid that the east west orientation of the house takes away some of the option for solar. With a couple of acres of lawn, maybe I could put solar on the ground.

I wonder how many utility companies are factoring in the possibility of residential solar? They may end up being very happy that plans for coal plants were cancelled.

It seems to me that enlightened munipalities would be doing all they can to get all new houses built with solar power plants at the beginning. Now is the best time to be doing it too. With 4-5% 30-year mortgages, it would seem that the savings on electric bills would already completely compensate for the increased cost in the mortgage payments.

@David Benson, very perceptive! The rest of us will lease our rooftops and panels from NRG (or a competing solar lease company) for less than we pay for energy now! NRG captures all the profit from the REC’s, tax rebates, depreciation and difference in cost over the 20 yr. lease. Interesting business model! The 99% can’t own the means to generate their own energy – that would be too democratic.

I’m not sure it can happen as quickly as he says it can, but new SPV technologies are being announced pretty regularly so I am hopeful we can save ourselves from the disaster that awaits us if we do not attend to our energy consumption patterns without care.

My roof faces south – I would love to cover that sucker up with panels and have it plugged into a smart car in the gee-rage.

Very interesting Goeff. However this is about the US not the dismal old UK.
I think that Solar is going to be generated in N Africa and put into a European super grid, complementing N European wind/tidal power.

As a UK based solar/wind analyst, I agree with your friend’s comments. We don’t have the sun to do what the US can do, whereas the North African deserts have lots of sun, little land value and are close enough to Europe to be utilised by a European grid. There are a number of German insurance companies investing a lot of money in CSP in North Africa.

I see a supergrid having lots of advantages in Europe (the USA will likely have a similar supergrid across its large area), but the recent troubles with the Euro are my main concern with its success. A supergrid will require a lot of international collaboration between the European states, and that’s not looking as feasible as it was a couple of years ago, especially as places like Morocco and Algeria would then be quasi-EU entrants. After all the issues with the Euro, that might present a lot of political risk. The technology itself though, has a lot of merits.

Living in a cloudy climate not unlike Germany and the UK, I keep watching for a combined threshold of technology and economics that would make sense for an installation on a home in the Northeast.

Given a 25-year-plus expected life of solar panels, I end up thinking I’d have to get a new roof to go underneath such a set up, as lifting up the solar panels to replace the roof underneath is surely very expensive. Local weather is already hard on roofing materials, with replacement and repair a fact of life here. The solar panels are supposed to protect the roof, at least from UV, but I doubt if they take care of ice and moss and leaf mold.
Any long term use reports on the effects on roofs?

Living in the Caribbean for 35 years has given me a different perspective on wooden houses. After watching many well built structures (as well as lots of less well built ones) torn apart by hurricanes, I have come to the conclusion that not only are forests more important than wooden houses; when you add up the fragility and the upkeep over a long time and compare that with the durability of a cement structure, the conclusion is obvious. Since greener cement processes are being developed, that would be the way to go. A well-built cement house has no roof decay problems, and could easily support solar panels as long as they survive.

For an existing wooden structure, the cost of a new and durable roof needs to be compared to the cost of replacing the entire structure with a more durable and energy efficient cement and stone building. If the rest of the house is worth a new heavy duty roof, fine, but if not, the difficult decision of replacing the home needs to be considered.

“And, of course, energy efficiency does not require new power lines and does not generate greenhouse gas emissions or long-lived radioactive waste.”

This is perceptive, as is the entire article, until you mention as a matter of fact that nuclear energy will produce “long-lived radioactive waste.” This is a very common error, and indicates a lack of study of the latest designs of nuclear reactor. The latest reactors do not produce long lived waste, and can be designed to use present stockpiles of nuclear “waste” as fuel, converting the elements into energy and a very small amount of relatively short-lived waste. Also the newest designs are extremely safe and can use thorium as fuel, giving us a very long term supply of clean energy.

Building and using new-type nuclear reactors is one of the best ways to rapidly replace coal burning base-line power. There is really no excuse for building more coal burning plants, and adding new nuclear capacity to the total energy picture would allow us to demand that the tar-sand craziness be abandoned.

Re-reading my comment, I had another thought. If there is no structural alloying problem, it seems that the small amount of radioactive material left over from the modern processes should just be re-incorporated into the next batch of fuel rods. Being radioactive, it would contribute some energy, and would not need to be stored separately. Just keep all the radioactive stuff in the reactor where it will be out of the way and useful. As long as the processing needed was not too expensive, this would be an ideal solution to any remaining storage needs.

A very encouraging article. I built a solar-powered house here in steamboat springs, CO 15 years ago when it was expensive, and I haven’t regretted it. I like to think that in some small way I paved the way for this. Also, I don’t hear anyone talking about the problem with EVs in cold climates such as ours. I’d love to find a 4WD EV that has batteries that will work at -10 degrees F.